November 24, 2022
  • November 24, 2022

The Dollar Wobbles As Global Inflation Soars; kiwi jumps

By on October 18, 2021 0

New Zealand dollars

Marc Coote | Bloomberg | Getty Images

The dollar had a shaky start to the week on Monday, with the kiwi and the pound slightly higher after a reading of searing inflation in New Zealand and hawkish remarks from the head of the British central bank that put the uptick interest rates in the sights of investors.

The dollar index has now slipped about 0.6% from last week’s highs in 2021, as investors believe that while price pressures could push the Federal Reserve’s hikes forward, others central banks may have to be more aggressive during the tightening cycle.

New Zealand announced its biggest quarterly consumer price hike in a decade on Monday. Bank of England Governor Andrew Bailey said Sunday that soaring energy prices would prolong the surge in inflation and that policymakers “will have to act” if they see any risks.

The data pushed the kiwifruit up about 0.3% to a one-month high of $ 0.7105. The British pound rose 0.1% to $ 1.3762, just below Friday’s one-month high of $ 1.3773.

The Australian dollar was also close to its six-week high, hovering around $ 0.7413. Oil futures have set new three-year highs and fueled expectations that even bigger price hikes were heading down global supply chains.

“The rest of the world is probably outperforming the United States in terms of inflation, for now, and that puts more pressure on these central banks than on the United States,” Westpac currency analyst said. , Imre Speizer.

In New Zealand, he said, the surprise price hike would only reinforce the need for the Reserve Bank of New Zealand to stay the course on its upward trajectory, he added.

The dollar made small gains against the euro and held steady against the yen, last trading at $ 1.1587 per euro and buying 114.22 yen.

Bitcoin, touted as a hedge against inflation and amid hopes the United States will approve a futures-based exchange-traded fund that would inject liquidity into the sector, hovered just below its all-time high of $ 64,895. He last bought $ 62,233.

Fed funds futures are now fully anticipating rate hikes in the United States that will begin next September as inflation pressures increase, but a relatively shallow cycle is expected, with prices suggesting rates may persist at 1 , 5% until 2026.

Swap pricing suggests faster, longer action is now more likely elsewhere – with nearly a 30% chance of a Bank of England rate hike this year and nearly 80 basis points of hikes until 2022.

Even in Australia, where the central bank has insisted it plans to hold rates until 2024, swaps predict price hikes that will start in mid 2022 and for 100bp of hikes even before the start of the market. 2024.

Data on China’s gross domestic product is due Monday, with analysts expecting a slowdown, and the focus is on Chinese credit markets where large numbers of real estate developers have to pay coupons.

The yuan was firm in offshore trading at 6.4324 to the dollar.